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Central Bank cuts interest rate to 13.5%, seeks GDP rebasing.

The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday reduced the Monetary Policy Rate, also known as the benchmark or main interest rate, from 14 per cent to 13.5 per cent.

The MPR, which is used to determine bank lending rates and the cost of credit for borrowers, had been held at a record high of 14 per cent since July 2016 when it was hiked by 200 basis points from 12 per cent.

The CBN Governor, Mr Godwin Emefiele, who announced the decision of the MPC at the end of a two-day meeting in Abuja, explained that six members out of 11 who attended the meeting agreed to reduce the current monetary policy stance.

He said while the MPR was reduced to 13.5 per cent, the committee decided to retain the Cash Reserves Ratio at 22.5 per cent, the liquidity ratio at 30 per cent; and the asymmetric window at +200 and -500 basis points around the MPR.

He said, 'The MPC decided by a vote of six out of 11 members to reduce the monetary policy rate by 50 basis points, that is 0.5 per cent. Two members voted to reduce the rate by 0.25 per cent, while one member voted to reduce it by one per cent. Two members, however, voted to hold the MPR at its current level.'

Emefiele said the decision to reduce the rate was taken in the overall interest of the economy, as there was a need to have a refocus on monetary tightening.

This, he stated, would help to increase the level of credit from the banking sector to businesses.

He said the new direction had become imperative against the backdrop of the aftermath of the general national elections and strong inflow of foreign direct and portfolio investment into the economy.

He said the committee called for the rebasing of the economy, an exercise that was last done by the National Bureau of Statistics in 2010.

Rebasing of the Gross Domestic Product means replacing the old base year used for compiling the GDP with a new, more recent, base year for computing the constant price estimates.

As relative prices and the structure of the economy change over time, it is necessary to update the base year frequently.

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Publication:Ghanaian Chronicle (Accra, Ghana)
Date:Apr 4, 2019
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